Aegis Brands sells Second Cup

The company will focus on growing entrepreneurial brands as it hands its legacy coffee chain to Quebec's Foodtastic in a $14 million deal.

Aegis Brands has reached an agreement with Quebec franchise company Foodtastic to acquire “substantially all” of the assets of specialty coffee chain Second Cup.

Foodtastic owns 17 restaurant and bar brands, totalling 130 locations. The roster includes La Belle & La Boeuf, Carlos & Pepe’s and Souvlaki Bar. Second Cup would be Foodtastic’s first coffee shop, though coffee is a key offering at Loo Koo, its Greek bakery brand.

The deal is worth $14 million in cash payable on closing – which is still subject to customary approvals – as well as post-closing royalties earned from certain Second Cup cafés that are opened following closing.

Steven Pelton, president and CEO of Aegis, said in a release that the company will now focus on further development of its coffee chain Bridgehead and cannabis retailer Hemisphere, while also “seeking out exciting new growth and acquisition opportunities” focused on entrepreneurial brands with strong growth potential.

In 2019, Second Cup announced a corporate restructuring to create Aegis Brands, a new parent company that would own Second Cup as a subsidiary, as well as a portfolio of other brands. It has since launched the Hemisphere Cannabis retail banner, and one year ago closed on its acquisition of Ottawa’s Bridgehead Coffee, which now has 20 locations. The Aegis restructuring was finally completed in Sept. 2020.

According to the most recent financial filing from the company, there were 231 Second Cup cafés as of Sept. 30 (31 of which were corporate-owned). There are now four Hemisphere locations open – with three more expected to open in the near future – with a focus on converting Second Cup cafes. The company reported a $751 million net loss for the quarter; while it reported combined revenue of $6.25 billion from its corporate-owned and franchise stores, they also resulted in $4.15 billion in operating expenses (the company did not break out how much of the revenue and expenses were for Second Cup, Hemisphere or Bridgehead).

Aegis previously said that while it would look to limit the opening of new cafes – turning some existing ones into Hemisphere locations – it would also focus on “non-traditional” locations for further growth, such as hospitals, transit stations, airports, gas stations and grocery stores.